Does $5 gas = buy a hybrid or electric car? A cost/benefit analysis [Updated]

This post has been updated from its original version. A new paragraph, marked by an asterisk, has been added.

Walking the dog the other morning, I heard an odd whistle and hum behind me; it was one of my neighbors returning home (I happened to be standing in front of his driveway at the time), driving his new Nissan Leaf electric car.

“How do you like your Leaf?” I asked, while dragging the pooch out of his path.

“Man, I absolutely love it. I haven’t been to a gas station in, like, two months.”


Unless he’s been reading the news, my neighbor probably has no idea that California is enduring a sudden, surprising and, for other people, very painful spike in gasoline prices, which in some parts of the Southland have crossed the $5-a-gallon mark. This is creating a serious economic hardship for many. After all, not everybody can afford a $35,000 electric car to replace their gas-guzzler, and $90 or more to fill the tank of an SUV is real money. That got me wondering: When you consider all the costs of owning and operating a new car in this environment of soaring gas prices, is my neighbor a genius or a chump?

The U.S. Department of Energy’s Alternative Fuels Data Center has an interesting tool on its website for comparing the costs of fuel and ownership of nearly every motor vehicle sold in the U.S. I compared my neighbor’s Leaf to seven other popular 2012 gas-powered models, including the hybrid Toyota Prius, given current local electricity prices and figuring the average current price of gas at $4.75 a gallon. Here’s what I came up with:

Fuel costs for the Leaf come to 22 cents per mile, far lower than any other car on my list (the other models I picked, besides the Prius, were the BMW 328i luxury sedan, Ford Focus compact, Honda Civic compact, Honda CR-V crossover, Mini Cooper subcompact and Toyota Camry sedan). The popular Prius hybrid, no surprise, was the next cheapest to fuel, at 29 cents per mile. Closest behind were the Focus at 33 cents per mile and the Mini at 34 cents. Turning to annual operating cost, the Leaf is again a big winner at $2,629, followed by the Prius at $3,407, the Focus at $3,985 and the Mini at $4,031. The most expensive vehicle on my list to operate was the 328i at $4,998, but I doubt many Beemer owners care.

Also interesting is a DOE chart that shows the cumulative cost of ownership per year for my eight models, from year one of ownership to year 15. This is helpful because it’s not just about fuel costs; it also considers the purchase price, assuming buyers took out a five-year loan with a 10% down payment, as well as the costs of registration, insurance, maintenance and other factors. And on this measure, the economy cars -- the Ford Focus, Mini Cooper and, very surprisingly to me, the CR-V -- start to look more attractive. Until year 12, in fact, the Focus is the cheapest car to own on the list; that’s when the superior fuel savings of the Prius finally make up for its higher purchase and other costs. Given that few Americans keep a car for 12 years, that makes the Focus, which gets 38 mpg on the highway, a more economical choice than a Prius for most people.

As for the Leaf, it does, eventually, make up for its higher upfront cost: Its cumulative cost of ownership finally matches the Focus and the Prius at year 15. Another interesting discovery, for me, was that the CR-V, which gets a fairly unimpressive 22 miles per gallon in city driving and 30 mpg on the highway, has a lower cost of ownership than the Leaf until year eight.

*But wait! Astute reader tfisher points out that this analysis doesn’t factor in the $7,500 federal tax credit offered for the Leaf and other all-electric vehicles. Plug that in, and electrics start to look a great deal more attractive. In fact, after six years of ownership, cumulative costs are better for the Leaf than any other car on my list. The only caveat is that not all buyers will get the full credit, because you can’t collect more in tax credits than you pay in income taxes. So if you only owe the IRS $4,000 in the year you buy your Leaf, you’ll only get a $4,000 tax credit -- you don’t get the remaining $3,500 off next year’s taxes. Still, if you’re buying a Leaf you probably have at least one other vehicle for longer trips, and most buyers are probably well-off enough to collect the full credit.

This whole analysis obviously has a lot of missing variables. For one thing, it doesn’t consider emissions. Those monitoring their own carbon footprints might be willing to pay a little more to emit less, or nothing. My assumed $4.75 price for gas will, of course, change -- but, I suspect, it will change in ways that benefit hybrid and electric owners. While it’s true that the current price spike probably won’t last long, the overall trend suggests that gas prices will keep rising sharply for the foreseeable future (yes, even if Mitt Romney is elected president; his “Drill, baby, drill” philosophy can’t possibly make up for rising demand for oil in India and China).

(For the record: Updated at 8:30 a.m. Oct. 6: The original version of this post contained a final paragraph saying that gas-powered economy cars were often a better deal than electric cars, but in consideration of the new paragraph marked by an asterisk above, that conclusion has been deleted.)


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